A Big Bill with Big Impacts

The One Big Beautiful Bill Act (OBBBA) has been described as one of the most sweeping tax and economic packages in recent years. While it covers a wide range of topics — from individual tax relief to family incentives — small businesses stand to benefit from several important provisions.

This post highlights the changes most relevant to small business owners, explains how they might affect your finances, and outlines simple steps to take advantage of them.

 

1. Permanent 20% Pass-Through Deduction

One of the biggest wins for small businesses is the permanent extension of the 20% Qualified Business Income (QBI) deduction. This deduction has been a tremendous benefit for owners of pass-through entities and sole proprietorships, which was originally intended to provide a tax break that paralleled the reduction in C corporation rates under the Tax Cuts and Jobs Act (TCJA) of 2017.

If you’re the owner of a sole proprietor, S-corporation, or partnership, this means you can continue to deduct up to 20% of your qualified income — permanently — without worrying about future expirations or sunset provisions, provided you meet the non-limiting requirements of Section 199A.

Why It Matters

• Provides long-term certainty for planning and investment.
• Keeps small business owners on stronger footing relative to large corporations that already enjoy lower rates.

Action Step: Review your business structure with your accountant to confirm you’re maximizing the QBI deduction and eligible income categories.

 

2. 100% Bonus Depreciation and Immediate Expensing

The OBBBA extends full and immediate expensing for certain business assets — including machinery, equipment, and qualified software — through 2030.

Why It Matters

• New equipment or technology can be fully deducted in the year you buy it rather than depreciated over time.
• Helps improve cash flow and encourages reinvestment in your business.

Action Step: If you’re planning equipment or tech purchases, consider moving them forward to take advantage of this full expensing provision.

 

3. Simplified 1099 Reporting and Lower Compliance Burden

The bill simplifies reporting requirements for contractors and payment platforms by raising 1099 thresholds. Beginning in tax year 2026, the threshold will increase from $600 to $2,000 and then will be increased annually for inflation.

Why It Matters

• Fewer small transactions trigger reporting, reducing paperwork and compliance risk.
• Frees up administrative time and cost for small teams with limited accounting resources.

Action Step: Update your bookkeeping and payment systems to ensure they reflect the new thresholds beginning in the 2026 tax year.

 

4. Expanded R&D and Innovation Incentives

The legislation improves tax treatment for domestic research and product development. It restores full expensing of R&D costs and introduces bonus credits for innovation in technology, energy efficiency, and process improvement.

Why It Matters

• Encourages small firms to innovate and grow without being penalized by long amortization schedules.
• Can reduce taxable income for qualifying activities — even modest in-house testing or design efforts.

Action Step: Track all R&D-related expenses — from prototyping to digital tool development — as more of these costs now qualify for deductions or credits.

 

5. Payroll, Tips, and Employee Benefits

The service industry in particular benefits from new deduction for tip income and expanded options for Dependent Care FSAs and childcare tax credits.

Why It Matters

• Restaurants and hospitality businesses gain more favorable treatment of tipped wages.
• Offering childcare or flexible spending benefits can be a valuable recruiting and retention tool in a tight labor market.

Action Step: Work with your payroll provider or HR platform to apply new credits and communicate these benefits to employees in 2025.

 

6. Retirement Plans and Contribution Limits

The OBBBA also includes updates to retirement savings provisions — though most are broad adjustments rather than structural overhauls. Beginning in 2026, contribution limits for 401(k), 403(b), and similar plans will increase and be indexed automatically for inflation.

While the One Big Beautiful Bill clearly boosts retirement-plan contribution limits beginning in 2026, small business owners sponsoring a SIMPLE IRA or SEP-IRA should note: there’s no major published change yet that directly alters those plan types’ rules. So, if you continue a SIMPLE or SEP, your administration and limits remain largely as before — but because the law raises limits for 401(k)-type plans, it may be worth reviewing whether your current plan continues to serve your business’s goals, especially if you (or key employees) want to contribute more.

Why It Matters

• Higher contribution limits mean greater tax-deferred savings opportunities for owners and employees.
• Could make switching from a SIMPLE or SEP IRA to a 401(k) more attractive, provided benefits offset the additional administrative costs.

Action Step: Review your retirement plan with your advisor to decide whether your current structure still fits your goals under the new rules.

Final Thoughts

The One Big Beautiful Bill Act offers small businesses a powerful combination of tax relief, simplified reporting, and expanded savings opportunities. While not every provision will apply to every business, understanding what’s available — and planning early — can deliver meaningful financial advantages.

Need help keeping your books in check?  Give us a call, or send us an email, we’re here to help, so you can focus on running your business.

It’s well known that small businesses often outsource services to optimize resources, access specialized expertise, and focus on revenue generating activities. So, let’s explore the advantages of outsourcing, and common reasons for hesitation.

Here’s a detailed breakdown of the reasons why small businesses choose to outsource:

Cost Savings
Outsourcing helps small businesses reduce expenses related to:

• Labor costs: Hiring full-time employees can be expensive due to salaries, benefits, and taxes. Outsourcing provides a more flexible and often lower-cost alternative.
• Infrastructure: Outsourcing avoids the need for extra office space, equipment, or software, since service providers typically use their own.
• Training and onboarding: External vendors already have trained staff, reducing training time and costs.

Access to Expertise
Small businesses may lack in-house knowledge in areas like:

• IT and cybersecurity
• Accounting and bookkeeping
• Marketing and SEO
• Legal and compliance

Outsourcing allows them to leverage experts with specialized skills, tools, and up-to-date knowledge, which might otherwise be out of reach.

Focus on Core Business
By outsourcing non-core functions, small business owners and teams can:

• Concentrate on what they do best—product development, sales, and customer service.
• Avoid distractions from back-office tasks like payroll or data entry.
• Enhance overall efficiency and productivity.

Scalability and Flexibility
Outsourcing offers adaptable solutions that align with changing business needs:

• Scale up quickly during busy seasons or growth phases.
• Scale down during slow periods without the burden of fixed employment costs.
• Access services on-demand without long-term commitments.

Risk Management
External providers often have:

• More robust compliance frameworks.
• Experience handling industry-specific regulations.
• Business continuity and disaster recovery plans.

This reduces the risk for small businesses, especially in complex or high-risk areas like IT security and tax compliance.

Small business owners often recognize the potential benefits of outsourcing, but many are still hesitant to take that step. This reluctance can stem from a mix of practical concerns, emotional factors, and misconceptions. Here’s a summary of the key reasons why small businesses hesitate to outsource services:

Concern	Description
Loss of control	Fear of disconnect from daily operations
Quality issues	Concerns about inconsistent or subpar work
Data privacy risks	Worries over sharing sensitive information
Unpredictable costs	Fear of being locked into expensive contracts
Bad past experiences	Distrust due to prior failed outsourcing
Resistance to change	Internal reluctance to adjust processes
Finding the right provider	Difficulty identifying trustworthy partners

Addressing the Hesitation
To overcome these concerns, small businesses can:

• Start with small projects before scaling outsourcing.
• Choose providers with proven track records and industry-specific expertise.
• Set clear service-level agreements and maintain frequent communication.
• Use secure, cloud-based platforms to ensure data privacy.
• Combine outsourcing with internal oversight for the best of both worlds.

Outsourcing can offer substantial benefits, but the key to successful implementation is knowing which services are low-risk and high-reward. Below is a detailed guide on the safest services to outsource for small businesses, based on factors like standardization, data sensitivity, scalability, and impact on customer experience.

1. Bookkeeping and Accounting
2. IT Support and Cybersecurity
3. Digital Marketing
4. Customer Support (Non-Critical)
5. Administrative and Virtual Assistant Tasks
6. Human Resources (HR) Functions
7. E-commerce Fulfillment and Logistics

In summary, outsourcing makes strong strategic and financial sense for small businesses, even in the face of common hesitations. It allows them to access expert-level services, advanced technology, and scalable support without the high costs of hiring full-time staff or investing in infrastructure. By delegating time-consuming and specialized tasks—such as accounting, IT, or marketing, business owners can focus on core operations and growth. While concerns about control, quality, and data security are valid, these can be effectively managed through clear contracts, trusted providers, and modern tools. Ultimately, outsourcing offers a flexible, cost-efficient way for small businesses to improve efficiency, maintain compliance, and stay competitive in an increasingly demanding marketplace.

Accounting probably isn’t your favorite part of running a business—but ignoring it can seriously hurt your bottom line. Small mistakes can snowball into cash flow issues, tax trouble, or missed opportunities for growth. Here are five of the most common accounting pitfalls small businesses fall into—and how to avoid them.

 

1. Mixing Business and Personal Finances

The Mistake:
Using the same bank account or credit card for both personal and business expenses.

Why It’s a Problem:
It makes it hard to track your business’s true financial health, complicates tax filing, and can raise red flags in an audit.

How to Avoid It:
Open separate bank accounts and credit cards for your business. Always pay yourself through a draw or payroll rather than swiping the business card for groceries.

2. Falling Behind on Recordkeeping

The Mistake:
Waiting until the end of the month—or even the year—to update your books.

Why It’s a Problem:
It increases the chances of errors, missed invoices, and forgotten expenses. It also leaves you flying blind when it comes to cash flow.

How to Avoid It:
Set aside time weekly (even just 30 minutes) to update your books or consider hiring us, Freedom Accounting Services, to enter your transactions for you!

3. Not Saving Receipts or Documentation

The Mistake:
Tossing receipts or failing to track documentation for purchases and deductions.

Why It’s a Problem:
You could lose out on tax deductions or get into trouble with the IRS if you can’t back up your expenses.

How to Avoid It:
Use a digital tool or app (like QuickBooks) to snap pictures of receipts and store them securely. Make it a habit right after each purchase.

4. DIY Bookkeeping Without Understanding It

The Mistake:
Trying to manage the books without knowing the basics of accounting or using the software incorrectly.

Why It’s a Problem:
Incorrect categorization, missed transactions, and reporting errors can lead to bad business decisions or tax penalties.

How to Avoid It:
If you’re doing it yourself, invest time in learning the fundamentals or take a short course. Or better yet—hire a professional accountant (like Freedom Accounting Services!) to help you get set up properly.

5. Ignoring Financial Reports

The Mistake:
Only looking at the bank balance to assess business performance.

Why It’s a Problem:
You’re missing out on valuable insights that can help you grow your business or spot issues before they escalate.

How to Avoid It:
Review your profit and loss statement, balance sheet, and cash flow report regularly. These reports tell the full story of your business’s health—not just your bank balance.

Final Thoughts

Accounting might not be glamorous, but it’s one of the most powerful tools you have to run a successful business. Avoid these common mistakes, and you’ll gain more control, confidence, and clarity over your finances. Need help with anything? No problem! We at Freedom Accounting are ready to service your accounting needs and help your business run smoothly!

Ready to get started?  Give us a call or send us an email today!

As the year winds down and 2024 comes to a close, it’s a good time to start thinking about your 1099 filing requirements. Staying on top of this important deadline is key to remaining compliant with IRS regulations, and we’re here to help make the process smooth and stress-free.

Who Needs to Receive a 1099?

You need to issue a 1099 form to any individual or unincorporated business to whom you have paid $600 or more during the fiscal year for services rendered. This includes:

• • • Contractors, Vendors & Service Providers: If you hired independent contractors, freelancers, or consultants, you must issue a 1099-NEC if their total annual compensation meets or exceeds $600. This also applies to payments made to vendors, suppliers, or other non-corporate entities that provided services.

    • Rent & Legal Payments: If you paid rent to an individual or non-corporate entity, you need to issue a 1099-MISC. Additionally, payments to attorneys for services rendered will also require a 1099-MISC.

Who Does NOT Need a 1099?

There are some exceptions to the 1099 filing requirement:

• • • Corporations: You do not need to issue a 1099 to a corporation (including LLCs taxed as corporations).

    • Employees: Payments made to employees should not be reported on a 1099; they should be reported on a W-2 instead.

    • Payments for Goods or Merchandise: If you paid for physical goods or inventory a 1099 is not required.

    • Payments to Tax-Exempt Organizations: You do not need to issue a 1099 to tax-exempt entities, such as:

      • • Charitable Organizations.

        • Churches & Religious Organizations.

        • Private Foundations.

        • Political Organizations.

        • Other Non-Profits.

Types of 1099 Forms You May Need to File

Here is a quick overview of the most common 1099 forms and their purpose:

1. 1. 1. 1099-NEC – Used to report non-employee compensation, such as payments to independent contractors, freelancers, etc. This is the form used for most service-based payments exceeding $600.

      2. 1099-MISC – This form is used to report a variety of payments in excess of $600, such as:

         • • • Rent payments.

             • Prizes and awards.

             • Payments to attorneys (non-employee).

             • Medical & health care payments.

             • Crop insurance proceeds.

             • Other income payments.

      3. 1099-INT – If your business paid $10 or more in interest income, you must issue a 1099-INT to the recipient.

      4. 1099-DIV – Used for reporting dividends of $10 or more, including distributions from stocks or mutual funds.

      5. 1099-R – This form is for reporting designated distributions of $10 or more to retirement accounts, pensions, or annuities.

      6. 1099-K – Issued for payments processed through third-party networks like PayPal, credit card processors, etc., if the threshold exceeds $600 in a calendar year.

1099 Filing Deadline

The deadline for issuing 1099 forms to recipients and filing them with the IRS is January 31, 2025.

If you need assistance in preparing and filing your 1099 forms, we are happy to offer our services. Our team can manage the entire process, ensuring that all necessary forms are submitted accurately and on time.

Please let us know if you would like us to assist you with your 1099 filings. We are here to help make this tax season as efficient and stress-free as possible.

As many of you are aware, a section of the Corporate Transparency Act mandated that small businesses report information about the business and the individuals in control of it to the federal government.

In an important ruling regarding this mandate, on Tuesday, December 3, 2024, a U.S. District Court issued a nationwide preliminary injunction which temporarily blocks the enforcement of the Corporate Transparency Act, stating that it is likely unconstitutional. However, since the injunction is not permanent, any final ruling will be made after the January 1, 2025, deadline for filing the BOI information, and is likely to be further litigated which means that a final resolution on this will not be known for quite some time.

Despite the injunction, if the filing requirement applies to your business, you will need to decide whether to comply with the filing requirement and to do so by the deadline of January 1, 2025.

The following are some important points to assist you regarding the BOI filing requirement.

• • • If your business was created by filing a document with a secretary of state, then you will need to determine if the requirement applies to your business.

    • Generally, the requirement applies to businesses employing 20 people or less in the U.S. and have reported gross revenue of $5M or less on the prior year tax return.

    • There are 23 categories of exempted entities which you can find in the attached guide.

    • Penalties for not filing by the deadline may be enforced at $500 per day late up to a maximum of $10,000. Further, willfully failing to report or intentionally filing inaccurate information is a felony, punishable by up to two years in prison.

    • If you are uncertain about complying with the Act given the temporary injunction, we encourage you to consult with legal counsel.

Further information:

• • • Click here to access the compliance guide which provides detailed information regarding the requirements.

    • The BOI E-Filing Site is located at https://boiefiling.fincen.gov/ .

Please note that we are not providing filing services regarding BOI reporting, however please let us know if we can help in any other way.

As the end of the year approaches, it’s time for business owners to start planning for tax season. Maximizing your deductions is one of the best ways to reduce your taxable income, ensuring you keep more of your hard-earned money. Here are some of the top tax deductions that many businesses may qualify for — and a few tips on how to take advantage of them before December 31st.

Home Office Deduction
If you use part of your home regularly and exclusively for business, you may be eligible for the home office deduction. This deduction allows you to claim a portion of expenses like mortgage interest, rent, utilities, and repairs as business expenses.

Tip: The IRS provides a simplified option to calculate this deduction at $5 per square foot of your home office, up to 300 square feet. Make sure you measure accurately and maintain records to justify your space allocation.

Business Equipment and Technology
Purchasing new equipment like computers, printers, and other technology essential for running your business can often be deducted. Thanks to Section 179 of the IRS tax code, you may be able to deduct the full purchase price of qualifying equipment bought during the tax year rather than depreciating it over time.

Tip: If you’re considering upgrading any technology, it’s best to make those purchases before the year ends. Keep detailed receipts and purchase records, and ensure the equipment is used primarily for business.

Professional Development and Continuing Education
For service providers who need to stay on top of industry trends or maintain certifications, the cost of courses, seminars, or professional memberships may qualify as a deduction. This can include books, training materials, and even subscriptions to professional journals.

Tip: Document all receipts and the purpose of each educational expense. If you attend virtual events or webinars, the registration fees are typically deductible.

Mileage and Travel Expenses
If you drive your personal vehicle for business purposes, you can deduct those miles at the IRS standard rate (67 cents per mile in 2024). Travel expenses for business trips, such as flights, hotels, and meals, are also deductible if they are directly related to your work.

Tip: To claim mileage, keep a detailed log of your trips, including dates, mileage, and the purpose of each trip. Mobile apps can make tracking easier and more accurate.

Marketing and Advertising Expenses
Costs associated with promoting your business, like ads, website development, and social media marketing, are generally fully deductible. This includes any expenses for print materials, branding, and promotional items.

Tip: Track all marketing-related expenses throughout the year and review any upcoming campaigns to see if there are opportunities to increase spending before December 31st to maximize your deductions.

Insurance Premiums
Business-related insurance, such as liability insurance, health insurance for yourself or your employees, and even cyber insurance, is often deductible. These premiums are considered necessary for the business and therefore qualify as a deduction.

Tip: If you’re self-employed and paying for your own health insurance, you may be able to deduct the cost on your personal return, so check with your tax advisor to optimize this benefit.

Legal and Professional Services
If you’ve paid for services from attorneys, accountants, consultants, or other professionals, these costs are deductible as ordinary business expenses. This deduction can also include fees paid for tax preparation, bookkeeping, or business consulting.

Tip: Review all invoices paid for professional services and be sure to deduct these fees on your return. Professional fees can add up quickly, so don’t overlook this category.

Office Supplies and Software Subscriptions
Small items like stationery, printer ink, software subscriptions, and other office supplies add up throughout the year and can be claimed as deductions. Subscriptions for software services, whether for accounting, project management, or design tools, also qualify.

Tip: Check any monthly or annual software subscriptions you use for business, and ensure you have receipts. For new purchases, consider making them before the year ends to claim them for this tax year.

Health Savings Account (HSA) Contributions
If you have a high-deductible health insurance plan, contributing to an HSA can be a smart way to save on taxes while covering medical costs. Contributions to an HSA are deductible up to certain limits, providing a tax-free way to pay for qualifying healthcare expenses.

Tip: HSA contributions can still be made up to the annual contribution limit until the tax filing deadline in April, but planning ahead can be helpful for cash flow and health budgeting.

Retirement Contributions
Contributing to a retirement plan, like a SEP-IRA or a solo 401(k), can help reduce your taxable income while securing your financial future. Contributions made before the year ends are generally deductible, with annual limits depending on your income and plan type.

Tip: Set up a recurring contribution schedule to make the most of tax-deferred savings options. It’s wise to consult with a financial planner or tax advisor to determine the right retirement account for your business and goals.

Tax planning is crucial to help you keep as much of your business income as possible. To make the most of these deductions, maintain organized records throughout the year and consult with a tax advisor who understands your unique needs.

With careful planning, you’ll be well-prepared to maximize your deductions, minimize your tax bill, and strengthen your business’s financial health going into the new year.

Year-end tax planning for businesses involves taking various steps to optimize your tax situation and, ideally, should start well before the end of the year. We recommend beginning the process as early as possible, preferably several months before the end of your business’ fiscal year.

By starting early, you give yourself enough time to gather accurate financial information, review your business’ financial performance, and identify potential tax-saving opportunities. It also provides ample time to consult with tax or accounting professionals who can help you navigate complex tax laws and regulations.

While specific strategies will depend on your business structure, industry, and individual circumstances, the following are some general considerations for year-end tax planning.

Review and update your financial records. Ensure that your financial records are accurate and up to date. This includes reconciling accounts, organizing receipts and invoices, and updating your general ledger. Accurate financial records will facilitate the tax planning process and help identify potential deductions and credits.

Accelerate or defer income and expenses. Depending on your current and projected tax situation, and basis of accounting for tax purposes, you may consider accelerating income into the current tax year or deferring it to the following year. Similarly, you can accelerate deductible expenses to maximize deductions in the current year or defer them to the next year to reduce taxable income.

Take advantage of depreciation and capital expenditure deductions. Consider purchasing necessary equipment, machinery, or other qualifying assets before the year-end to take advantage of depreciation and capital expenditure deductions. The Tax Cuts and Jobs Act (TCJA) allows for immediate expensing of certain business assets, which can provide significant tax benefits.

Review and adjust your employee benefits. Evaluate your employee benefit plans, such as retirement plans (e.g., 401(k) or SEP IRA), health savings accounts (HSAs), or flexible spending accounts (FSAs). Ensure that contributions are maximized and take advantage of any available tax credits or deductions associated with these plans.

Evaluate your business structure. Depending on the size and nature of your business, it may be beneficial to review your business structure to ensure it aligns with your long-term goals and provides the most advantageous tax treatment. Consulting with a tax professional or an attorney can help you determine if restructuring is appropriate.

Consider tax credits and incentives. Research and identify any tax credits or incentives that your business may be eligible for. These could include research and development tax credits, energy-efficient equipment credits, or hiring credits. Taking advantage of these opportunities can significantly reduce your tax liability.

Contribute to retirement plans. Contributing to retirement plans not only helps secure your future but can also provide tax advantages. Maximize contributions to qualified retirement plans for yourself and eligible employees to reduce taxable income.

Consider state income tax implications. Tax planning often focuses on the tax implications of planning decisions upon federal income taxes. However, you shouldn’t forget to consider how those decisions impact your state income taxes.

Review estimated tax payments. Assess your estimated tax payments to ensure that you have met your obligations throughout the year. If necessary, make additional payments before year-end to avoid potential penalties.

Consult with a tax professional. Tax laws and regulations are complex and ever-changing. Working with a qualified tax professional, accountant or CPA can provide valuable advice specific to your business and help you navigate the intricacies of tax planning.

Starting early allows for a more comprehensive and effective tax planning process, reducing the risk of overlooking potential opportunities and minimizing last-minute rush and errors. It’s crucial to consult with a professional who can provide personalized guidance based on your circumstances.

Remember, every business is unique, and the specifics of your business will determine the most effective strategies for your situation.